Spending Review 2025: what it means for charities

• No respite from the welfare and aid cuts announced in the Spring Statement. These continue to compound existing funding pressures, drive up operational costs, and reduce donations.
• Winter Fuel Payments will be reinstated for people earning up to £35,000.
• Still no U-turn or reimbursement for charities on Employer National Insurance contributions (NICs), which rose from April 2025.
• Local government funding will rise by 1.1% in real terms – though pressures on budgets remain acute.
• DCMS has suffered real term reduction in its budget of 1.4%. Meanwhile the Charity Commission’s budget is set to rise by more than a quarter to £37.9m next year.

Although the voluntary sector will welcome parts of the Spending Review, it doesn’t go far enough to support charities facing tough operating conditions. The sector continues to face a triple threat: rising costs, falling income and increasing demand.

Policy changes will shift demand for support

The reinstatement of Winter Fuel Payments for those with an income up to £35,000, will help more people stay warm and independent during winter. This has been lobbied for by many charities and could reduce pressure on those running food banks, warm hubs and emergency advice services.

The extension of free school meals to all children in households on Universal Credit is another significant change. Combined with the government’s commitment to end the use of asylum hotels, these measures may ease demand on frontline charities.

Investment in social and affordable housing will reduce demand for homelessness charities, domestic abuse services and crisis support. However, these benefits will take time to be felt.

At the same time, decisions made in the Spring Statement around welfare cuts could push 250,000 more people into poverty by 2029, when many charities are already struggling with the demand.

The Spending Review also does not reverse cuts to UK aid which come into force from 2027, and many international development charities are already scaling back programmes or making staffing cuts in preparation.

Difficult conditions for charities delivering services

Charities deliver over £14 billion worth of public services on behalf of central and local government. Many use fundraised income to plug funding gaps in contracts which is not sustainable.

Local government funding also remains under intense strain. Three-quarters of councils expect financial pressure in 2025–26. According to the Local Government Association, many will raise council tax and still need to make cuts to services which has serious implications for charities .

Meanwhile, the government has announced £113 billion in additional capital investment, including major infrastructure and transport projects but social infrastructure, such as places that bring people together, remains underfunded.

The release of dormant assets is another important opportunity to strengthen communities. The Chancellor has announced £130 million for youth services, including music and sport.

As part of the Community Wealth Fund Alliance, we continue to support allocating an equal share of dormant assets to a new Community Wealth Fund. This would provide long-term, community-led investment in places that need it most.

This Spending Review includes several investments that could enable more effective partnerships between government and the voluntary sector. This reflects the ethos of the Civil Society Covenant, launching this summer.

The government has committed funding for social housing, health services, skills development, children’s social care and probation reform. These are all areas where charities bring significant experience, trusted relationships and a deep understanding of community need.

Effective delivery of these public services depends on meaningful collaboration with the voluntary sector.